ACTADAPTATION TO CLIMATE CHANGE TEAM PAYING FOR URBAN INFRASTRUCTURE ADAPTATION IN CANADA An Analysis of Existing and Potential Economic Instruments for Local Governments WWW.SFU.CA/ACT PAYING FOR URBAN INFRASTRUCTURE ADAPTATION IN CANADA: An Analysis of Existing and Potential Economic Instruments for Local Governments by ACT (Adaptation to Climate Change Team) June 2015 With support from Natural Resources Canada through the Adaptation Platform Economics Working Group, the Cowichan Valley Regional District and The Real Estate Foundation of British Columbia. ACT (ADAPTATION TO CLIMATE CHANGE TEAM) CONTENTS CONTENTS. ................................................................................................................... 1 LIST OF ACRONYMS. .....................................................................................................9 ACKNOWLEDGEMENTS. .............................................................................................. 10 EXECUTIVE. ..................................................................................................................11 SUMMARY. ...................................................................................................................11 I. INTRODUCTION. ....................................................................................................... 17 II. CANADIAN CLIMATE CHANGE CONTEXT. ...............................................................23 II.1. A “Commitment” to Global Climate Change. ....................................................24 II.2 Climate Change in Canada. ...............................................................................28 III. ADAPTATION TO CLIMATE CHANGE. ......................................................................35 III.1 The Cost of Adaptation. ...................................................................................36 III.2 Adaptation and Climate Resilience at the Local Government Level. ................37 III.3 Canadian Infrastructure Deficit . .....................................................................39 III.4 The Economic Case for Adaptation. .................................................................40 III.5 Cost/Benefit Considerations. ..........................................................................42 III.6 Value of Blue Green Infrastructure (BGI). .......................................................44 IV. PAYING FOR ADAPTATION: THE CANADIAN EXPERIENCE. ..................................47 1 PAYING FOR URBAN INFRASTRUCTURE ADAPTATION IN CANADA IV.1 Finance Tools. ................................................................................................. 51 IV.2 Tool Evaluation Methodology. ......................................................................... 51 IV.3 Summary of Results. ......................................................................................54 IV.4 Evaluation Criteria and Best Practice Tools. ...................................................55 Effectiveness. ...................................................................................................55 Ease of Implementation. ..................................................................................55 Public Acceptance. ...........................................................................................56 Equity. ..............................................................................................................57 Flexibility. ........................................................................................................57 V. INTERNAL SOURCES FOR ADAPTATION INVESTMENTS AT THE LOCAL LEVEL. ....58 V.1 Conventional Financing . .................................................................................. 61 Borrowing. ............................................................................................................. 61 Design. .............................................................................................................64 Application to Climate Change Adaptation. .......................................................64 Feasibility. ........................................................................................................65 Reserve Funds. ......................................................................................................65 Application to Climate Change Adaptation. .......................................................66 Benefits. ...........................................................................................................67 Limitations. ......................................................................................................67 Feasibility. ........................................................................................................67 V.2 Innovative Financing . ......................................................................................68 Green Bonds and Climate Bonds. ..........................................................................68 Design. .............................................................................................................68 Application to Climate Change Adaptation. .......................................................68 Benefits. ...........................................................................................................69 Limitations. ......................................................................................................70 2 ACT (ADAPTATION TO CLIMATE CHANGE TEAM) Canadian Case Studies. ....................................................................................70 Feasibility . .......................................................................................................70 Tax Increment Financing (TIF). .............................................................................. 71 Design. ............................................................................................................. 71 Application to Climate Change Adaptation. .......................................................72 Benefits. ...........................................................................................................72 Limitations. ......................................................................................................72 Canadian Case Studies. ....................................................................................73 Feasibility Study. ..............................................................................................73 V.3 Conventional Funding . .....................................................................................73 Property Taxes. .....................................................................................................74 Application to Climate Change Adaptation. .......................................................75 Benefits. ...........................................................................................................75 Limitations. ......................................................................................................75 Feasibility Study. ..............................................................................................76 Tax Levy. ................................................................................................................76 Design. .............................................................................................................76 Application for Climate Change Adaptation. .....................................................76 Benefits. ...........................................................................................................76 Limitations. ......................................................................................................77 Canadian Case Studies . ....................................................................................77 Challenges. ......................................................................................................78 Feasibility . .......................................................................................................79 V.4 Innovative Funding . .........................................................................................79 Local Improvement Charges (LICs). .......................................................................79 Application to Climate Change Adaptation. .......................................................79 Benefits. ...........................................................................................................80 Limitations. ......................................................................................................80 Feasibility. ........................................................................................................ 81 3 PAYING FOR URBAN INFRASTRUCTURE ADAPTATION IN CANADA Surrey Drainage Tax. ........................................................................................82 User Fees. .............................................................................................................83 Application to Climate Change Adaptation: Stormwater Management Systems. .................................................................83 Benefits. ...........................................................................................................84 Limitations. ......................................................................................................85 Canadian Examples. .........................................................................................85